Avago Technologies agreed to acquire LSI Corporation for $11.15 per share in an all-cash transaction valued at $6.6 billion.
The acquisition creates a highly diversified semiconductor market leader with approximately $5 billion in annual revenues by adding enterprise storage to Avago's existing wired infrastructure, wireless and industrial businesses.
The combined company will be strongly positioned to capitalize on the growing opportunities created by the rapid increases in data center IP and mobile data traffic.
"This highly complementary and compelling acquisition positions Avago as a leader in the enterprise storage market and expands our offerings and capabilities in wired infrastructure, particularly system-level expertise," stated Hock Tan, President and Chief Executive Officer of Avago. "This combination will increase the Company's scale and diversify our revenue and customer base. In addition to these powerful strategic benefits, as we integrate LSI onto the Avago platform, we expect to drive LSI's operating margins toward Avago's current levels, creating significant additional value for stockholders."
"This transaction provides immediate value to our stockholders, and offers new growth opportunities for our employees to develop a wider range of leading-edge solutions for customers," said Abhi Talwalkar, President and Chief Executive Officer of LSI. "Our leadership positions in enterprise storage and networking, in combination with Avago, create greater scale to further drive innovations into the datacenter."
Regarding financials, Avago said it expects the deal will be significantly and immediately accretive to its non-GAAP free cash flow and earnings per share. Avago currently anticipates achieving annual cost savings at a run rate of $200 million by the end of the fiscal year ending November 1, 2015, the first full fiscal year after closing. Avago will fund the acquisition with $1.0 billion of cash from the combined balance sheet, a $4.6 billion term loan from a group of banks, and a $1 billion investment from Silver Lake Partners.